What is cost element?
Due to the integrated nature of SAP Systems there is a requirement to create expense accounts in Financial Accounting with corresponding primary cost elements in Controlling. This ensures that expenses in Financial Accounting and primary costs in Management Accounting can be reconciled.
The purpose of this WIKI contribution is to provide a full and clear understanding of what a Cost Element is, what its purpose in Controlling is and how it helps in the integration between FI and CO primarily.
Cost Elements play a very important role in the reconciliation/alignment of costs and postings between Financial Accounting (FI) and Management Accounting/ Controlling (CO) commonly called as SAP FICO module. There are different types of cost elements such as Primary Cost Elements, Secondary Cost Elements and Revenue Cost Elements all which have a specific purpose. The category set for a Cost Element at the time of creation will determine the transactions that can utilize the cost element.
Cost element category?
When you create a cost element, you must assign a cost element category. This assignment determines the transactions for which you can use the cost element. For example, category 01 (general primary cost elements) is used for the standard primary postings from Financial Accounting (FI) or Materials Management (MM).
Automatic creation of cost elements
You can create cost elements automatically. You provide the default settings through which the cost element or the cost element range that you want to create is given and enter the cost element types for the cost elements.
Primary Costs are only created when the respective general ledger exists in the operational chart. The SAP system takes the cost element name from the G/L account master data in Financial Accounting (FI). However, you can change the name in Management Accounting/ Controlling (CO) in transaction KA02.
Secondary cost elements are generated for all cost elements you have defined. The description is taken from the cost element category. Once you have entered your default settings, a background session starts that generates the cost elements.
SAP Simple Finance will affect SAP Controlling including how accounts and cost elements will merge, what you can expect to see in Reporting and Planning, and how account-based CO-PA has been enhanced to provide better Profitability Reporting.
What is cost center?
In business a cost centers is a division that adds to the cost of an organization, but only indirectly adds to its profit. Typical examples include research and development, marketing and customer service. Companies may choose to classify business units as cost centers, profit centers or investment centers
Why a cost center is required?
It is the location where the costs are incurred. It can be setup based on areas of responsibility, functional requirements, allocation criteria, geographical locations or activities or services provided. Its purposes is to provide cost related information in Overhead Cost accounting for which cost centers are grouped into units of decision making, control and responsibility. To map this structure, Cost center is placed in cost center standard hierarchy.
Step 1) To create a Cost Center, Enter KS01 into SAP transaction code box.
Step 2) In the next SAP screen
- Enter the new cost center number.
- Enter the validity dates of the new cost center.
In the reference section:
- In the Cost Center field, you can enter a reference cost center if the details are similar to the new cost center.
- In the Controlling Area field, you can enter the reference cost center’s controlling area.
Step 3) Click Master Data Button
Step 4) In the Names section:
- In the Name field, enter the name of the new cost center.
- In the Description field, enter a description for the new cost center.
- In the Basic Data section
- Enter the Person Responsible.
Step 5) In the Basic Data section:
- Enter the Person Responsible
- Select W (Administration) for Cost Center Category.
- Select the Hierarchy area.
- Enter the Company Code.
- The Currency will default based on the earlier selections.
Step 6) On the Control tab select the appropriate indicators.
Step 7) Click Save. New Cost Center is created.
Option2- Select ‘SAP_SFIN__ACC_MASTERDATA’ (Accounting Master Data)
Option2-Cost Center: Into ‘Organizational Structures’ menu cost centers maintenance is available after this, all fields contained in cost center are reachable.
For change and display: populate the criteria to find the cost center
SAP Simple Finance (Configuration Changes )
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